e.Digital Corporation (fka EDIG)

[Tenderloin]

Cornice makes major drive
Storage firm, industry have high hopes for tiny drive
http://www.corniceco.com/partners/index.html
http://www.corniceco.com/customers/index.html

By Erika Stutzman, Camera Business Writer
August 16, 2003

A new storage firm is grabbing the attention of everyone from investors to gadget-makers — something that has been notoriously hard to do in the down economy.

Kevin Magenis, president and chief executive of Cornice Inc. of Longmont, said the company's secret to early successes has been simple: It made something that people want to buy.

"We felt there was an opportunity in consumer electronics, if we could meet a certain price point," Magenis said. "The customers said, 'If you build it, we will buy it.'"

And so it did.

Cornice makes a one-inch, 1.5-gigabyte drive for products like MP3 players, personal digital assistants (PDAs) and digital cameras. Its drive, which can hold more than 30 CDs worth of MP3s, is already being used by customers including RCA, Samsung, iRiver, Digitalway and Rio. The RCA MP3 player with the Cornice device is for sale at Circuit City; a Samsung digital camcorder — which will hold 2 hours of DVD quality data — will be in stores in October.

The drive is under $100, with a target price of $50, Magenis said, so the gadgets containing the cheap Cornice drives can sell for less — attracting the product makers who have their own price points to make.

Magenis said there are about two dozen clients using the Cornice storage element now.

"We're sold out for this year. Now, we're ramping to meet those orders," Magenis said.

He said the company will announce several more customers by year's end.

Unlike DataPlay — a local firm that made a powerful tiny disk for media — Cornice focused on what was currently available. DataPlay, which eventually declared bankruptcy then was bought out, relied on special players.

"We made a conscious decision not to go to the content providers," like the music industry, Magenis said. "We wanted the customers to be the people making the devices, the people making the decisions."

Magenis said his team decided early on that people will get content the way they want — "whether it's legal or illegal" like some music downloads.

But what end users didn't want to do is have to buy special equipment to access it.

"It's tough to change an infrastructure," he said. "In my house, with the teenagers, and the different stereos and the cars, etc., there are probably 24 different slots for CDs. We're not going to replace all of those for new media."

Another thing that sets Cornice apart, Magenis said, was its decision to keep very lean with about 50 employees.

"These other startups needed hundreds of millions of dollars. We use the best of everything; the best suppliers, the best contract manufacturers," he said. By outsourcing, the firm didn't need a huge amount of startup costs, he said.

Cornice won in the Computer Products and Services category in the Boulder County Business Report's IQ (Innovative Quotient) Awards, and was named to the 2003 AlwaysOn List of Top 100 Private Companies.

But Magenis thinks the fact that it has big-name clients and is already on consumers' shelves is more important than awards.

"We're kind of past that," he said.

Early investors to the firm included the company's leadership and Texas Instruments. At the end of May, the firm announced that it had raised $22 million from investors including CIBC Capital Partners, Nokia Venture partners and VantagePoint Venture Partners.

In the meantime, the company has been written up in trade publications — including PC Magazine — and has won accolades by industry analysts from groups including In-Stat/MDR, MobileTrax and TrendFocus.

In a prepared statement, Dave Reinsel, IDC research manager for hard disk drives, said: "Cornice's unique approach to its portable storage design offers a variety of strategic and compelling benefits to electronic device manufacturers and the people who consume their products."

Reinsel in particular praised the product for having the desired compact size, low cost and high capacity — the requirement sought out by industry.

And that's the key to Cornice's success so far — not its whiz-bang ideas, but a core product that meets the needs of today's gadget makers, Magenis said.

"We're not reinventing an infrastructure. We just wanted to make it cheaper and more convenient for people," he said.

Contact Erika Stutzman at [e-mail] or (303) 473-13